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These seven stocks have great stories, positive catalysts for future growth, forward price-to-earnings ratios of less than 10 & below industry average and pay a dividend of greater than 3.5% yield. These are bullish indicators regarding a stock's possible future performance. Low price-to-earnings ratios are traits of stocks that are possibly undervalued and the dividend yields are a noteworthy additional benefit which reduces risk.

Moreover, most of these stocks are trading well below consensus analysts’ estimates. Several have recent upgrades and positive analyst comments. There may be more volatility in front of us even with the more than 10% drop in the market recently. Nevertheless this may be a good point to start a position in these below industry average forward P/E ratio, high-yield dividend paying buying opportunities. As Warren Buffett says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Many analysts are predicting a recession going forward. I don’t see it happening. How soon we forget: Just weeks ago you heard nothing of a recession, and now it is assured, according to the crowd. In my experience the crowd is usually wrong. Joe Terranova of CNBC’s Fast Money writes an excellent blog for Virtus Investment Partners. One of his latest posts bolstered my confidence in the soft patch-vs.-full-blown recession argument. Joe said:

I expect the result of this Philly Fed report will be limited upside potential for the S&P 500 Index beyond the August 17 high of 1208.47. The recovery momentum of the last week has stalled. The September releases of ISM Manufacturing and the U.S. jobs report loom large, and may answer the obvious question, "Are we heading into another recession?" I still do not believe we are.

Combining these factors with the Fed’s recent announcement that rates will remain at ultra-low levels for at least the next two years, we can see that fixed-income instruments such as bonds and CDs provide little protection against inflation. Factor this in with the fact that historically, dividend-paying stocks have outperformed non-dividend-paying stocks, and you have a recipe for outstanding returns. After the precipitous drop in the Dow in 2008, the high dividend payers were the first to recover.

Seven top mid-cap or better stocks with below-industry-average forward P/E ratios of less than 10 and a dividend yield of 3.5% or greater are General Electric Co. (GE), Pfizer (PFE), Intel Corporation (INTC), ConocoPhillips (COP), Abbott Laboratories (ABT), DuPont (DD) and Eli Lilly & Co. (LLY).

Below is a summary of each company’s dividend and EPS growth details, followed by a brief description of each company, a summary of current analysts' estimates and upgrade/downgrade activity and a chart of the company's key statistics. I would scale in to any position a quarter or a tenth at a time. Please use this as a starting point for your own due diligence.

Dividend and EPS Statistics (click on image to enlarge):


Company Reviews

General Electric Co. operates as a technology, media, and financial services company worldwide. General Electric has a forward P/E ratio of 9.37. The company is trading significantly below analysts' estimates. General Electric has a median price target of $24 by 14 brokers and a high target of $30. The last up/downgrade activity was on Jan 28, 2011, when Argus upgraded the company from Hold to Buy.

Pfizer, a biopharmaceutical company, offers prescription medicines for humans and animals worldwide. Pfizer has a forward P/E ratio of 7.79. The company is trading below analysts' estimates. Pfizer has a median price target of $23.00 by 14 brokers and a high target of $28.50. The last up/downgrade activity was on Aug 10, 2011, when Argus upgraded the company from Hold to Buy.

Intel Corp. engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Intel was founded in 1968 and is based in Santa Clara, California. Intel has a forward P/E ratio of 7.80. The company is trading below analysts' estimates. Intel has a median price target of $26 by 39 brokers and a high target of $32. The last up/downgrade activity was on Aug 8, 2011, when Standpoint Research upgraded the company from Hold to Buy.

ConocoPhillips operates as an integrated energy company worldwide. ConocoPhillips has a forward P/E ratio of 7.12. The company is trading below analysts' estimates. ConocoPhillips has a median price target of $85 by 18 brokers and a high target of $94. The last up/downgrade activity was Jul 15, 2011, when Howard Weil downgraded the company from Market Outperform to Market Perform.

Abbott Laboratories engages in the discovery, development, manufacture, and sale of health care products worldwide. Abbott Laboratories has a forward P/E ratio of 9.89. The company is trading below analysts' estimates. Abbott has a median price target of $55.50 by 16 brokers and a high target of $80. The last up/downgrade activity was on Jun 17, 2011, when Morgan Keegan initiated coverage on the company with an Outperform rating.

DuPont operates as a science and technology company worldwide. It operates in seven segments: Agriculture & Nutrition, Electronics & Communications, Performance Chemicals, Performance Coatings, Performance Materials, Safety & Protection, and Pharmaceuticals. DuPont has a forward P/E ratio of 9.45. The company is trading below analysts' estimates. DuPont has a median price target of $64 by 11 brokers and a high target of $70. The last up/downgrade activity was on July 27, 2010, when BB&T Capital Markets upgraded the company from Hold to Buy.

Eli Lilly and Co. develops, manufactures, and sells pharmaceutical products worldwide. Eli Lilly has a forward P/E ratio of 9.56. The company is trading on par with analysts' estimates. Eli Lilly has a median price target of $35 by 13 brokers and a high target of $43. The last up/downgrade activity was on Aug. 10, when Argus upgraded the company from Hold to Buy.

Source: 7 Bargain Dividend Stocks With Strong Upside Potential